While trading the markets, there are times when the little child within us shouts: “I don’t want to wait. I want it now.” But sustained profitability takes time. In his book, “Enhancing Trader Performance,” Dr. Brett Steenbarger argues that superior performance develops in three stages: Initiation, Development, and Mastery. Many novice traders dream of mastering the markets and achieving extreme wealth; they want to make huge profits now, but it is necessary to go through the initiation and development stages before achieving mastery. Why is it necessary to recognize the stage you are in?Eventual success in a challenging endeavor, such as trading, requires motivation. And cultivating the proper motivation requires that one set specific, realistic goals. Setting specific goals is essential for achieving high levels of performance. They allow for direct feedback. You know exactly where you stand and what you need to do next. Setting goals that are unrealistic usually leads to disappointment. For example, you may aim for a 20% return on your trading account, but if that is not a realistic objective, you end up failing, feeling disappointed, and giving up. If you set more realistic goals, however, you feel satisfied when you achieve them. You feel optimistic and ready to tackle the next goal in earnest. By realistically acknowledging where you are at in your stage of development as a trader, you can set goals that are consistent with your abilities, achieve them, and feel you are making steady progress.

Let’s review the three stages of development and what you should do in each. In the initiation stage of development, a novice trader explores the new field of trading and enjoys the process of discovery. Trading is pursued mostly because it is fun. In addition, many traders, who end up pursuing a career in trading, usually experience early success. For example, in our Innerworth interviews with seasoned traders, many reported that they became hooked on trading while realizing easy profits in a bull market. They did well, had fun, and thought they had special talents. These experiences of success set the foundation for their later mastery. During the initiation stage of development, the main goal should be to have fun with the new field. A novice trader should not focus on profits, but on managing risk. Trades should be viewed as practice trades. The goal at this stage is to develop an intuitive feel for the markets, not to make substantial profits.

The hard work of mastering the markets begins in the development stage. During this stage, a trader should work hard to develop specific trading skills and to develop a basic sense of competence. This is where a more serious commitment to the field begins. The trader in the development stage concentrates on learning different strategies and trying them out. A great deal of basic knowledge and skills is gathered, just as one would study any new profession. At this stage, it is still not wise to focus on performance goals, such as achieving a 20% return. It’s useful to distinguish performance goals from learning goals. For novice traders in the development stage, it is useful to consider setting learning goals rather than performance goals. A learning goal is more modest and can be achieved more easily. It involves breaking down the larger goal of eventual mastery into specific steps that are doable, and rewarding oneself after each step is accomplished. For example, a learning goal may be stating, “I’m going to study for 30 hours a week to learn a new trading technique.” The specific goal will not immediately lead to the larger goal of making a 20% profit, but it is easy to achieve, will lead to personal satisfaction upon completion, and in the long run, will contribute to the final stage of mastery.

During the mastery stage, traders try to reach their full potential. Reaching one’s highest possible level of performance is a primary motivator. At this stage, a trader may seek out the guidance of a teacher, mentor, or coach. Trading consumes most of their time. Intense focus is the key. The trader at this stage has already developed the basic skills required to trade. Now it is just a matter of actually working diligently to achieve specific financial goals, such as a 20% return on one’s trading account.

Whatever your stage of development, it is vital to set goals consistent with your current abilities. Mastering the markets is possible; it’s just a matter of setting the right goals and feeling good about the steady progress you make every trading day.